Transport for London (TfL) operates one of the largest closed loop prepaid schemes in the world. An estimated 52 million Oyster™ cards were in circulation as of February 2013.
Oyster is a proprietary transit card that allows the user to store either single ride tickets, season tickets, prepaid balance or a combination of these on it. The system is a card centric one (in that the card ultimately holds the correct and current set of data for that user).
When a user taps their Oyster card on a reader/validator (‘tapping in’), the reader attempts to establish the valid products on the card and select the correct one for the journey from that location. When using the prepaid element (referred to as Oyster Pay as you Go (or just PAYG)) the reader firstly looks to see if there are sufficient funds on the card to pay for the minimum fare from that point. If there are sufficient funds, the maximum fare is deducted (except on buses and trams which are fixed fares). This deduction of the maximum fare may cause the cardholder to go ‘overdrawn’ but acts as an incentive to always tap out. When touching out of the transit network (‘tapping out’), the reader will calculate the fare and update the balance on the card accordingly.
On 13 Dec. 2012, TfL launched contactless payment on their 9,000 buses enabling any contactless card capable of performing offline transactions (i.e. does not need to go online for transaction authorisation) to be used to pay for a single bus fare. The transaction process that takes place is equivalent to that of a standard offline retail payment. TfL intends to extend this service to other transport modes, such as the train, tube (underground), tram, and Docklands Light Railway in early 2014, though this will use a different transaction model and will additionally support cards requiring an online authorisation.
TfL are in the process of updating their current infrastructure so that any contactless payment chip card may be used to make payments on their public transport services. A suitable transaction model would allow the user to use pay as you go functionality on their standard issue credit/debit/prepaid/charge cards rather than having to have a separate, purpose issued card (such as an Oyster™ card).
Currently, seasons tickets are only available in paper ticket form or on Oyster™ cards. In the longer term, TfL are looking link contactless payment cards to season tickets. Current systems require season ticket information to be stored on the ticket or card. Linking season tickets to contactless payment cards would enable such information to be managed externally of the payment card allowing for improved and centralised management of information.
Eventually, many expect such technology to supersede existing paper ticket and Oyster™ card systems. However, there are users who do not have access to a bank account, don't have access to a contactless payment card or who don't want to use a contactless card which is directly linked to their bank accounts. Additionally there are some users who are entitled to discounted or free travel for which a bank issued card may not be suitable.
For this to happen, any new transaction model which is designed to replace the Oyster™ card system will ultimately need to perform at least as well as the Oyster™ card system (or any equivalent system in any other city where such a system may be implemented). There are currently certain ways in which an Oyster™ card user can manage a Pay as you Go account which could not be handled as efficiently by existing contactless payment card systems,
For example, people who manage their Oyster™ card balances close to zero are often denied entry at ticket barriers and, subsequently, top up their Oyster™ cards at a top up location with an amount equivalent to the cost of their intended journey or journeys, the amount being immediately loaded onto their cards, and then proceed through the barriers. As described in greater detail above, only the minimum fare must be available to enable the commencement of a journey, but the maximum fare is deducted when a user taps in at a terminal. The fare is calculated and the balance updated on exit.
Current credit/debit/prepaid/charge card (hereafter, ‘payment card’) pay as you go transaction models are unable to match this functionality. The risk is managed through periodic authorisations which, if approved, provide the transit agency, e.g. TfL, with protection up to a certain value, £20 in the case of UK transit agencies such as TfL (as of September 2013), with the card issuer accepting all liability for all transit spend up to that amount if they approve the authorisation. For users who manage the balances of their accounts below the liability value, say at £5, the issuer may well decline the transit authorisation as they wouldn't want to take on the risk of losing money.
However, an Oyster™ card would allow a person with the £5 in their account to make a £1.40 journey. Accordingly, current payment card pay as you go transaction models do not provide the same functionality as the Oyster™ card system and would therefore not be considered as a suitable alternative for a purpose issued transit card to address the needs of the unbanked, those without a contactless function on their bankcard or those who chose not to use their bank issued contactless card.
Current payment card pay as you go transaction models may operate using a Deny List. This is a list of cards blocked for travel for a variety of reasons including insufficient funds, lost or stolen cards, repeated fare evasion or staff abuse. TfL currently holds their Deny Lists at each of their readers across London. The speed with which these lists can be updated is limited by the network architecture of the transit agency. It may take up to half an hour for lists to be updated.
Accordingly, a problem can arise where a user with insufficient funds in their account tries to make a payment at a reader using their payment card and is, subsequently, placed on a Deny List. When the user has then transferred sufficient funds into the account to which their payment card is linked, they will be unable to make a journey until the Deny List at the reader has been updated. Furthermore, additional actions are typically required by the user to inform the transit agency (such as TfL) that they have now added funds to the account and that they would like to be removed from the Deny List. At this point, the transit agency must perform a check with the user's card issuer to check that it is indeed OK for the card to be removed from the Deny List. If the issuer grants such approval then (in the case of TfL) the Deny List update may take up to half an hour, during which time the user will be unable to use the transportation system.